Executive summary

On 27 June 2025, the Intergovernmental Negotiating Committee on the United Nations (UN) Framework Convention on International Tax Cooperation released draft issues notes on each of its three workstreams on developing the draft text of the UN Framework Convention, the early protocol on taxation of income derived from the provision of cross-border services and the early protocol on prevention and resolution of tax disputes.

The Intergovernmental Negotiating Committee invited stakeholders and UN member countries to provide input on the draft issues notes by 11 July 2025 and 21 July 2025, respectively. On 14 July 2025, the UN published the input received from stakeholders by the 11 July 2025 due date, totaling more than 65 contributions from various organizations and individuals. It is anticipated that the UN will also publish the submissions from member countries after their deadline has passed. The input received will be considered when the Intergovernmental Negotiating Committee discusses and revises the draft issues notes during its substantive sessions in August 2025.

Detailed discussion

Background

In December 2022, the UN General Assembly adopted Resolution 77/244, which called for the beginning of discussions on ways to strengthen the inclusiveness and effectiveness of international tax cooperation through the evaluation of options, including the possibility of developing an international tax cooperation framework. This work culminated in December 2023 with the UN General Assembly's approval of Resolution 78/230, which provided for the establishment of an ad hoc committee to draft Terms of Reference (ToR) for a UN Framework Convention on International Tax Cooperation. (See EY Global Tax Alert, The Latest on BEPS and Beyond — January 2024, dated 17 January 2024.)

In June 2024, the ad hoc committee released a "zero draft" for the ToR, seeking feedback from stakeholders and ultimately receiving more than 100 submissions. (See EY Global Tax Alert, The Latest on BEPS and Beyond — July 2024, dated 17 July 2024.) The ad hoc committee discussed and approved by vote on 16 August 2024 a revised ToR for submission to the UN General Assembly. (See EY Global Tax Alert, UN Ad Hoc Committee advances Terms of Reference for a Framework Convention on International Tax Cooperation, dated 22 August 2024.)

On 24 December 2024, the UN General Assembly adopted Resolution 79/235, formally approving the ToR for the development of the UN Framework Convention on International Tax Cooperation. This resolution provided for the establishment of an Intergovernmental Negotiating Committee responsible for drafting the Framework Convention and two early protocols. The ToR specify that one of the early protocols will address the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy and further provide for the subject of the second early protocol to be determined at the organizational session of the Intergovernmental Negotiating Committee.

The Intergovernmental Negotiating Committee is scheduled to meet three times each year in 2025, 2026 and 2027, with the expectation of submitting the final text of the Framework Convention and the two early protocols to the General Assembly for consideration in 2027. (See EY Global Tax Alert, UN General Assembly approves Terms of Reference for Framework Convention on International Tax Cooperation, dated 2 January 2025.)

In February 2025, the Intergovernmental Negotiating Committee held its organizational session, during which members selected the Bureau for the Committee and established a decision-making process. The Committee also chose the prevention and resolution of tax disputes as the subject for the second early protocol. (See EY Global Tax Alert, UN intergovernmental negotiating committee on Tax Framework Convention on Tax Cooperation holds organizational session, dated 17 February 2025.)

On 4 April 2025, the Intergovernmental Negotiating Committee released an initial roadmap and guidelines for developing the Framework Convention and two early protocols. The roadmap outlines a schedule for the development process with milestones for each workstream from March 2025 to July 2027. The Committee plans to convene three sessions each year during this period, with the first and second substantive sessions scheduled for August 2025. The guidelines emphasize the importance of clearly defined work plans and provide for multi-stakeholder consultations, with a first public briefing organized before the first substantive session. (See EY Global Tax Alert, UN negotiating committee of Framework Convention on International Tax Cooperation releases roadmap and guidelines, dated 15 April 2025.)

Draft issues notes

On 27 June 2025, the Intergovernmental Negotiating Committee on the UN Framework Convention on International Tax Cooperation released three draft issues notes on its workstreams: Workstream I on the framework convention, Workstream II on the early protocol on taxation of services, and Workstream III on the early protocol on tax dispute prevention and resolution. The Committee invited stakeholders and UN member countries to submit input by 11 July 2025 and 21 July 2025, respectively.

The Chair of the Intergovernmental Negotiating Committee, along with the Co-Leads of the Workstreams, invited international organizations, civil society organizations, and other relevant stakeholders to participate in three briefing session held on 30 June (Workstream II), 1 July (Workstream I), and 2 July 2025 (Workstream III). During these sessions, the Co-Leads presented an overview of the draft issues notes prepared as part of the Committee's intersessional work, aimed at providing clarity on the content of the issues notes and the approaches being used in each workstream to enhance the input provided by various stakeholders in advance of the August 2025 sessions.

On 14 July 2025, the UN published the input received from stakeholders, which totaled more than 65 submissions from international organizations, including the Organisation for Economic Co-operation and Development, civil society organizations, academia and businesses. There were 27 submissions on Workstream I, 24 on Workstream II and 16 on Workstream III.

Workstream I on the Framework Convention

The draft issues note on Workstream I outlines the development of the UN Framework Convention on International Tax Cooperation. The draft text of the Framework Convention, along with the early protocols on the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy and the prevention and resolution of tax disputes, is set to be submitted to the UN General Assembly in the second half of 2027.

The ToR provide significant detail regarding the expected content of the Framework Convention, emphasizing the need to prioritize drafting commitments by the end of 2025. The work plan categorizes provisions into three groups: those that flow from the commitments, those that depend on the commitments (such as capacity building and technical assistance), and those that are procedural and can be drafted at any time. The draft note indicates that productive discussions have taken place regarding potential commitments, but some subjects require further development before being presented to the Intergovernmental Negotiating Committee.

Workstream I has identified three key commitments for potential presentation at the August 2025 Sessions. The first commitment focuses on the effective prevention and resolution of tax disputes, aiming to establish mechanisms that are fair, independent, accessible, and effective in resolving tax disputes in a timely manner. The draft note indicates that the urgency of this commitment is underscored by the complexities of cross-border transactions and the need for legal certainty to facilitate trade and investment.

The second commitment addresses the fair allocation of taxing rights, aiming to ensure that every jurisdiction where business activity occurs shares in taxing rights over the income generated. The draft note indicates that discussions have highlighted the need for a fair approach that considers economic efficiency, tax neutrality and the implications of digitalization for business models.

The third commitment emphasizes sustainable development, as referenced in the ToR, and calls for pursuing international tax cooperation approaches that contribute to sustainable development in economic, social and environmental dimensions. The draft note indicates that commitment in this area would reflect the need for balanced and integrated approaches to tax cooperation.

The draft note provides that Workstream I will address additional subjects outlined in the ToR, including tax evasion and avoidance by high-net-worth individuals, tax-related illicit financial flows and effective mutual administrative assistance. It indicates that developing countries have expressed the view that a lack of information on income or assets held abroad poses significant challenges. These subjects are anticipated to be presented as a comprehensive package at the November 2025 session of the Intergovernmental Negotiating Committee.

Workstream II on the early protocol on taxation of services

The draft issues note on Workstream II outlines the development of the first early protocol on the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy.

The initial task for Workstream II is to agree on the scope of the protocol. The work plan anticipates an initial discussion of the protocol's scope and approach at the August 2025 sessions, with further guidance provided at the November 2025 session, followed by discussions on drafting options later in 2025. Since the first meeting, on 13 May 2025, discussing Workstream II, the focus of the workstream has been on the challenges of taxing nonresidents on income from services provided to residents, exploring common structures involving cross-border services to develop taxation principles for inclusion in the protocol.

The draft note indicates that discussions have highlighted significant differences in how UN member countries tax income from cross-border services, with many developing countries imposing gross-basis withholding taxes on payments to nonresidents, while most developed countries tax based on where services are performed. The workstream has acknowledged that existing rules, which often require physical presence for taxation, do not adequately reflect modern business practices, particularly as many services can now be provided remotely.

The draft note indicates that discussions in the workstream have emphasized the need for new nexus rules that support domestic resource mobilization and ensure a fair allocation of taxing rights. The discussions have also touched on the concept of "value creation," with some arguing that market presence should justify taxation, while others caution against creating economic distortions through gross taxes on cross-border transactions.

According to the draft note, the workstream is moving toward considering shared (e.g., apportioned) taxing rights for income from services, recognizing the need for source countries to retain some taxing rights while ensuring that residence states also maintain their rights. As discussions continue, the workstream will explore whether different rules should apply to various types of services and the appropriate manner of taxation, whether through gross-basis withholding taxes or net-basis taxation.

The draft note asks the Committee to consider whether the draft note's description of the current rules for the taxation of services and the reasons for the call for change is comprehensive or are their additional considerations that should be taken into account, what considerations are most important in developing possible new rules, and how to best define the scope of the protocol in terms of the taxes and services it will cover.

Workstream III on early protocol dispute prevention and resolution

The draft issues note on Workstream III outlines the development of the second early protocol on the prevention and resolution of tax disputes. This protocol aims to address the increasing frequency and complexity of cross-border tax disputes arising from globalized business models and intricate international tax rules. The draft note indicates that the workstream began the review of this topic from scratch, with the goal of providing an overview of the issues and proposing possible options for measures after the August 2025 sessions.

The draft note emphasizes that effective and efficient dispute resolution is crucial for reducing costs and increasing legal certainty for cross-border business activities and investments. It discusses the limitations of existing bilateral treaty mechanisms and the need for a more multilateral approach to stabilize and enhance fairness in the international tax environment.

The draft note indicates that discussions in the workstream have identified common challenges in cross-border disputes, particularly concerning transfer pricing, permanent establishments and the treatment of digital services. It further notes that discussions revealed that litigation of tax disputes is often time-consuming and resource-intensive, with tax authorities facing significant disadvantages due to information asymmetries. The workstream aims to develop mechanisms that can prevent disputes from arising and resolve them efficiently when they do occur, ultimately increasing domestic resource mobilization by fostering cross-border trade and investment.

The draft note indicates that the workstream has also explored various approaches to dispute prevention, including clear tax legislation, advance pricing agreements (APAs) and cooperative compliance practices. It notes that many developing countries face challenges in implementing these mechanisms due to limited legal frameworks and smaller tax treaty networks. The potential for joint audits and the use of digital solutions to streamline dispute resolution processes have also been discussed.

Regarding the resolution of tax disputes, the draft note indicates that the workstream acknowledges the importance of the Mutual Agreement Procedure (MAP) under bilateral tax treaties, while also recognizing the limitations and delays often associated with this process. It indicates that some participants have expressed interest in exploring mandatory arbitration as a means to resolve disputes, while others remain cautious due to concerns about national sovereignty and the potential disadvantages for developing countries.

According to the draft note, the workstream is considering the scope of the protocol, with differing views on whether it should focus solely on disputes involving cross-border transactions under the Framework Convention or also address purely domestic disputes. It indicates that the concept of optionality within the protocol has been discussed, which would allow countries to choose which mechanisms to adopt and could facilitate broader participation.

The draft note asks the Committee to discuss during the substantive sessions in August 2025 whether the draft note describes the primary barriers to the prevention and resolution of tax disputes, whether the protocol should address only tax disputes involving cross-border transactions or whether it might be appropriate to include mechanisms for purely domestic disputes, and whether to concept of optionality with respect to the mechanisms provided in the protocol is generally acceptable to the Committee.

Implications

The ongoing discussions and developments in the Intergovernmental Negotiating Committee regarding the UN Framework Convention on International Tax Cooperation and its associated protocols involve important aspects of the international tax landscape. As the work progresses with key milestones set for 2025, 2026 and 2027, the future of global tax cooperation will continue to evolve.

Companies should monitor these developments and evaluate the potential implications for their tax profile. Engaging with policymakers in relevant jurisdictions will provide the opportunity for businesses to share their insights and perspectives on these important matters.

Companies also should consider participating in multi-stakeholder consultations that will be organized ahead of the Intergovernmental Negotiating Committee sessions to provide feedback on the draft texts and contribute to shaping the legal instruments being developed. Business participation in these consultations introduces into the dialogue the interests and concerns of the business community.